June Buying Advice: What questions should you ask at the open house?
Know what to ask — and how the answers will help you find the right home to buy.
Open houses can be a wonderful way to find your next house. They can be just as helpful in gathering intelligence about a neighborhood, getting a feel for its housing stock or simply scoping out real-estate agents with whom you might like to work.
But what should you ask when you pay a visit? In this month's "Buying Advice," we consulted agents and other real-estate experts for their insights on how to navigate open houses.
We'll also update you on the latest housing and mortgage stats, and see how most people are feeling about the housing market's prospects. And real-estate author and blogger Ilyce Glink will answer one reader's question about whether he can legally have two primary residences.
If you play your cards right, an open house can tell you a lot more about a property than its floor plan or the condition of its floors. The key is asking the right questions, agents say. (Or if you're looking with your agent, making sure she does it for you.)
Here are some questions to ask the listing agent and how these questions might help you in your purchase of the home:
Have you had any offers on the property? That lets you know if you have competition for the property, says Kim Drusch, an agent with Century 21 Award in San Diego. You'd also want to know if the sellers had rejected any offers and why, agents say. It could help you better craft an offer that will meet with their approval.
Has this house been in escrow? If it has, and didn't sell, you'd want to know why. Was it an appraisal issue? Did a home inspection turn up some major damage? If it has been in escrow, ask if any inspections were done on the house. If there were, ask for copies of these reports, so you know what you're dealing with, and what kind of secondary inspections you might need should you decide to make an offer.
How long has the property been on the market? If it's getting a little stale, it might be ripe for a lower offer, experts say. Likewise, find out if there's been a price reduction and when it happened.
Why are the owners selling? The agent showing the house is likely to remain mum on this one. But, then again, she might also let it slip if they are moving soon, are under financial pressure or are building another house and might need more time in the house if she's a little desperate to move the property. Any information you can glean can help you decide how much to offer, when to close, etc.
Are there any liens on this property? You don't want any surprises, so make sure there aren't any construction liens, tax liens or other claims on the property resulting from unpaid debt, such as unpaid homeowners association dues.
Is the home going to meet a lender's appraisal expectations? Do you have comparable sales in the last 90 days? These days, with prices on the decline, and more and more properties getting taken back by banks, appraisal at the listing price isn't always a sure thing. Take a look at the recent comps and have your agent check pending sales to make sure you won't get stuck once you've starting spending money on inspections and other aspects of the process.
Are there any other costs of ownership? Here again Drusch says you want to make sure there's nothing to surprise you after closing. If it's in a condominium complex or other planned community, ask about association dues and additional taxes or assessments, especially if it's a newer community. And if there is a homeowners association, get its phone number and call it to make sure there aren't any rules that conflict with your lifestyle, pets, etc. You don't want to find out, after the fact, that your husband can't park his work truck in the driveway of your new home, Drusch says.
Have your agent follow up with the listing agent via fax or email to get it all on paper.
"Make sure everything is in writing," Drusch says. And, as always, make sure you have your own home inspection done, even if you have been assured there are no problems with termites, plumbing, etc.
Existing-home sales dipped 0.8% in April from the previous month and 12.9% from the previous year, when the homebuyer tax credit was in effect, according to data from the National Association of Realtors. The national median home price declined 5% from last April to $163,700.
Lawrence Yun, the NAR's chief economist, says tight credit and low appraisals are putting the brakes on many home purchases.
"Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 25% to 20% due to the very restrictive loan-underwriting standards," Yun said.
Moreover, distressed homes, which trade at double-digit discounts to traditional listings, are still weighing heavily on the market. Distressed homes made up 37% of sales in April, down from 40% in March, but well above the 33% posted at the same time last year.
Investors are the most excited about the still-floundering market. All-cash deals accounted for 31% of transactions in April, down from a record 35% in March.
Mortgage rates drop
The one bright spot for buyers is that mortgage rates continue to drop, increasing affordability. Fixed-rate mortgages declined for the fifth straight week, as of May 19, Freddie Mac said in its Primary Mortgage Market Survey, with a 30-year fixed averaging 4.61% and the 15-year averaging 3.8%.
Economists versus consumers: The outlook
Just don't look for that investment to appreciate in value immediately. Economists don't predict a return to home-price gains until early to mid 2012.
Fannie Mae, for one, expects the median home price to decline 6% in the second quarter of this year from the same time in 2010, with those losses slowly tapering off this year, until the market hits bottom in the first quarter of 2012.
Analysts at J.P. Morgan expect an additional 6% decline in prices from where the market stands today.
But perhaps most bearish are consumers themselves.
In a joint housing survey conducted by Trulia and RealtyTrac, released in mid-May, 54% of those polled said they don't expect the housing market to recover until 2014 or beyond. Twenty-four percent expect a recovery in 2013.
It's clear, says Fannie's chief economist Doug Duncan, that despite low prices, low interest rates and improving job numbers, consumer attitudes have yet to rebound in a way that will really push the needle up on home sales.
"In spite of the positives surrounding the housing market, we see that consumers are still hesitant to take on a large financial obligation," Duncan says.
Still, he says he expects home sales to rise some this year, as the economy gets on surer footing.
And for many, it might begin to make more sense to buy. According to Trulia's most recent data, it is now more affordable to buy a home than rent a similar home in 78% of major U.S. cities.
Here's a question from one of our readers, Doug, about whether he can claim residence in two states:
Q: I have read that a married couple can have two primary homes if one is living out of state due to job conditions. Is this true? I recently purchased a house in Nevada, where I have been working for the past three years, and we were renting a home in Arizona. We want to live in Arizona and are trying to buy a home there now, but were told that we could not have two primary residences.
A: The IRS has several ways to determine whether the home you're living in is your primary residence. First, you must spend at least six months and one day living in your primary residence. So, if you're in the house in Nevada during the week and in Arizona on the weekends, the Nevada house would be your primary residence.
According to IRS.gov, for taxpayers with multiple homes, the regulations list several factors relevant to determining which home is the principal residence. Among these are amount of time used; place of employment; where other family members live; the address used for tax returns, driver's license, car and voter registration, bills and correspondence; and the location of the taxpayer's banks, religious organizations or recreational clubs.
Unfortunately, the IRS isn't crystal clear about whether married but separated spouses can have two primary residences. I asked Bill Nemeth, president of the Georgia Association of Enrolled Agents, to weigh in.
Nemeth said: "The short answer is that the IRS will allow a main home and a second home to be deducted on Schedule A, assuming the couple files 'married filing jointly.' The main home is the home where they live most often. If the question really involves the states of Nevada and Arizona, it can get very complicated very quickly, since they are both community-property states. If the taxpayers file 'married filing separately,' the discussion takes on a lot of 'it depends.'"
It's possible that the IRS would permit a married-filing-separately couple to claim two primary residences, but when it comes time to sell, you'd only be permitted to take up to $250,000 in profits tax-free on each property.
For more details on what constitutes a primary residence, go to IRS.gov and check out Publication 523, Selling Your Home. But to get an expert opinion, consult with an accountant, enrolled agent or tax attorney who can research the tax records.
Remember: Your questions are welcome. We'd love to answer them in future installments of this column. Please submit them in the comments section below or on MSN Real Estate's Facebook page, or email them to firstname.lastname@example.org. Please keep in mind that short questions with the broadest range of interest have the highest chance of being answered.
First, do your research. Do not go off what the NAR says. The reason is simple, they are looking at the country as a whole and real estate purchases and sales are regional. Take the Phoenix market for example. In the last qtr, home prices in some cities went up 3.9% (in a quarter!) and some other areas went down 7.5% in the same quarter. the truth of the matter is, many areas that are not desirable to buyers were over built. Other areas that are more desirable are still in demand.
Second, never use a friend (unless you know them to be a good agent) as your agent. You want someone to represent you and to be honest, not tell you what you want to hear. Real estate is easy to make emotional and it never should be. Real Estate transactions are complicated and require someone who really knows what they are doing to get the best deal. Like lawyers, there are good Realtors and bad ones.
Last, this is a great time to buy. The perfect storm of low prices and low interest rates. No one knows how long either will last. Did you know that in the Phoenix market the inventory of homes is down to just 3 months? Last month Phoenix sold over 9,500 homes which is almost 1,000 more than when the market was "hot" in 2005 and 2006. Two things are certain in life. The Fed will raise the interest rates and eventually most real estate prices will go up. Anyone who is trying to predict the peak or bottom of any market is not well educated in that market.
Crying Tree, you, like many others have probably ridiculously over-estimated the value of your house and do not like it when you're confronted with that fact. I got a mortgage from WF and they appraised the apartment quite fairly.
Your home is only worth what someone is willing to pay for it.